What’s the Difference Between An Appraisal and A Home Inspection?

Are you selling your home? It’s easy to confuse an appraisal with a home inspection. Even though there might be a little crossover they are not the same. Although appraisers note obvious problems when they come across them, their job is quite different than that of a home inspector.

A home inspector fishes for problems and anything that’s been unattended. Preventative maintenance is necessary for every area of your home. Here are a few things they’ll be sure to look for:

Is all exposed wood siding and trim well painted and caulked?

Is the condensation cleaned out of your air conditioning unit?

Are all door locks lubricated?

Is there moss buildup on asphalt shingle roofs?

Most home inspectors can consult with you to identify areas that may be in need of preventative maintenance. This type of inspector usually charges an hourly rate.

An appraisal isn’t a home inspection. The appraiser won’t look at the items we discussed in the last paragraph. Don’t expect them to look at the roof. They won’t check out the chimney or test appliances either. And NEVER count on an appraisal to determine the condition of your home. That’s the inspector’s job.

When a home is new, there’s a process called the cost approach. It’s useful when the costs to build a new home are unknown. The appraiser estimates the cost of replacing a structure if it were destroyed for some reason.

A loan commitment usually hinges on an appraisal that meets the lenders’ approval. This is because the bank wants to be sure its investment is covered if you default.

What if the property appraises lower than the sale price? In this case, the loan might be declined. There are also other potential issues that can stall your sale. For example, if the entry to the property is from a private shared road the bank might require a road maintenance agreement signed by everyone who uses the road.

Your best bet is to maintain your property so you’ll breeze through the sale. Then your home inspector and appraiser will do their part of being sure everything goes smoothly.

Peter is a co-creator of The Flipping Formula. He also founded CityLight Homes, a premier real estate investing firm in New England. He is an internationally recognized real estate investing expert, appearing on national news outlets such as CNBC, CNN, and CBS. Together with his business partner Dave Seymour, Peter starred in A&E's hit reality TV show Flipping Boston.